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We believe that Actuant Corporation (ATU - Free Report) is a solid choice for investors who are seeking exposure in the machinery industry.

The stock, with roughly $1.8 billion market capitalization, was upgraded to a Zacks Rank #1 (Strong Buy) on Jun 23.

Why the Upgrade?

We are providing a snapshot of how Actuant fared in the third quarter of fiscal 2018 (ended May 31, 2018). The company’s earnings of 39 cents per share surpassed the Zacks Consensus Estimate by 8.3%. Net sales went up 7.3% year over year, on the back of healthy performance of Industrial and Engineered Solutions segments. Both core sales and favorable foreign currency movements added 4% to sales growth.

We believe, sound performance in the fiscal third quarter, as well as solid projections for the fourth quarter and fiscal 2018 (ending August 2018), have helped in raising Actuant’s investment appeal. For the fiscal, the company anticipates gaining from higher maintenance activities in the energy end market and its efforts to suppress inflationary situation. Also, product launches help in enhancing the company’s top-line growth prospects. For instance, a new line of chain cutters and a new line of Bottle Jacks were added to the company’s Enerpac product line in the fiscal third quarter.

Sales for fiscal 2018 are now projected to be $1.17-$1.18 billion versus $1.14-$1.16 billion expected earlier. Moreover, earnings projection has been tweaked to $1.03-$1.08 from the previous expectation of $1.00-$1.10, raising the mid-point from $1.05 to $1.06.

Also, Actuant aims at keeping a check on costs through headcount reductions, operational improvements and facility consolidations. In addition, the company’s decision — to move from a three-segment business structure to a two-segment structure by the beginning of fiscal 2019 (ending August 2019) — will help it focus on building a sound industrial tool and component & systems businesses. Furthermore, the company’s inorganic initiatives will be advantageous. In the fiscal third quarter, Actuant acquired Equalizer. This buyout was added to the Industrial segment. It will help in strengthening the company’s channels and engineering talents.

In the past seven days, the company’s earnings estimates for both fiscal 2018 and 2019 (ending August 2019) have been revised upward by six brokerage firms. The Zacks Consensus Estimate is pegged at $1.06 for fiscal 2018 and $1.29 for fiscal 2019, reflecting growth of 2.9% and 4% from the respective seven-day-ago tallies. Also, these estimates reflect year-over-year growth of 27.7% for fiscal 2018 and 21.3% for fiscal 2019.

In the last 60 days, earnings estimates for each of these stocks improved for the current year. Also, average positive earnings surprise for last four quarters has been 12.81% for Graco, 250.43% for Twin Disc and 15.50% for Kadant.

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At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1988 it has more than doubled the S&P 500 with an average gain of +25.32% per year. These returns cover a period from January 1, 1988 through November 5, 2018. Zacks Rank stock-rating system returns are computed monthly based on the beginning of the month and end of the month Zacks Rank stock prices plus any dividends received during that particular month. A simple, equally-weighted average return of all Zacks Rank stocks is calculated to determine the monthly return. The monthly returns are then compounded to arrive at the annual return. Only Zacks Rank stocks included in Zacks hypothetical portfolios at the beginning of each month are included in the return calculations. Zacks Ranks stocks can, and often do, change throughout the month. Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations.

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